CHANGING LEADERS

I just read in the NY Times that the Treasury Department is going to give Citigroup more money and take a significant minority interest. Apparently the current CEO, Victor Pandit is staying in charge.

It is really Workout 101 to change the CEO when the lenders have to put more money into a troubled situation that has no collateral of value to give to the lenders. Clearly Citigroup has no current value to give in exchange for the serial capital injections it is receiving.

And while Pandit is relatively new to the CEO position, just over a year, he didn't follow Workout 101 either. How so? Here is how. It is also Workout 101 that a large troubled company like Citi must be pared down to its profitable core, down to its profitable products and services and down to its profitable customers.

An experienced workout person would have arrived at Citi over a year ago and said, "this will be a much smaller company in a year" and would have started selling pieces to shore up the remaining company. Instead Pandit studied the situation and decided to keep virtually everything. What a missed opportunity.

So with this as a background, how does the Treasury Department not follow Workout 101 and bring in a new CEO?

Cheers, Mike